Millennials, You are the Driving Force of Financial Innovation
We are Millennials — the biggest generation of the United States history!
No doubt, we grew up with the internet and mobile smartphones and our learning and education is tied to the online resources. With articles claiming that technology has ruined our generation and humanity, those writers neglect that technology has improved our lives in so many ways.
In particular, we are using technology to transform an industry with high barriers to entry. This is an industry whose landscape only changed over the past two decades with modern regulations. Now, millennials are the driving force behind the changing landscape of the financial industry.
I used my first computer at the age of 6. I was emerged into the internet a few years later. My younger brother, on the other hand, barely remembers a time without the internet.
At the age of 10, I learned about compound interest and the stock market through Neopets — a virtual pets website. The National Neopian Bank taught me about interest rates and why saving can help me in the long term. Without the internet, I would not have understood investing and saving from a young age. I did not have any other resources to scour. The stock market seemed like an abstract concept for a fourth grader, but throw in some technological access, online games, and some healthy financial choices, I understood.
- We live in an age dominated with technological change and economic disruption.
- We are the first generation where technology shapes how we save, invest, and spend.
- We use the internet as an online platform to learn about services, products, and brands.
- We have instant accessibility to price comparisons — books on Amazon vs. those on Barnes and Nobles — to make our spending decisions.
- We control our sharing generation — we don’t go to our financial advisers for advice. However, we choose to tap into knowledge in financial blogs or personalized investment advice from mobile apps.
- We are the ones demanding for quality mobile apps, driving the shift from a desktop focused to a mobile first world.
In addition to this technological freedom, we are a generation with mountains of student debt, limitations in owning a house, and sprinkles of financial skepticism. We choose to delay marriage, home ownership, and children. Our incomes cannot live up to the inflated prices.
Let’s face it — we are investing, spending, saving our money differently than that of our previous generations.
With this, financial technology (FinTech) startups are innovating how we invest, save and make payments. We are changing the world and FinTech is following our lead.
Look around — we see FinTech revolutions in all aspects of our financial lives.
With personal finance management, over the past few years, we have seen a rise of “robo-advisors” like Betterment that aims to replace the private wealth management industry with an advanced personal finance algorithm.
Users are hopping onto these platforms for financial advice rather than choosing to head to private wealth management firms.
We see a revolution in lending where big banks are not the only lenders on the market. Peers are now lending money to each other with FinTech companies such as LendingClub. These companies specialize in arranging loans between lenders and borrowers, providing more value to both parties. They provide lenders higher return rates and borrowers with lower interest rates.
With payments, Apple Pay is shifting the payments industry towards mobile-focused payments instead of credit card payments. And, Venmo, a subsidiary of PayPal, supports peer to peer payments via a mobile platform. Venmo makes it easier for friends and family to transfer funds to each other. Venmo is growing as noted from PayPal’s latest quarterly earnings report — in our last quarter, Venmo’s volume up 174% to $2.5 billion.
From these examples, we can see that millennials are changing the financial industry. We are the driving force behind financial innovation. We are at the crux of an exciting time where the traditional financial industry needs to learn to adapt to the changing environment and small FinTech startups are dominating our lives.
Will we see a time when banks need to offer competitive returns on our savings and checking accounts? Will we see a time when people no longer use plastic to pay? Will wealth management firms incorporate these robo-advisors as part of their financial advice?
FinTech is changing how we operate in this industry.